Sticker shock: Ascension school officials weigh risk vs cost for major hurricane insurance
Had Ascension Parish taken a direct hit from Category 4 Hurricane Ida in 2021, the parish school system would have sustained $106.2 million in damage, a new risk estimate says, Agency officials in Ascension Parish, Louisiana's ninth-largest traditional public school system, have been assessing risk vs cost for major hurricane insurance. A new risk estimate suggests that a direct hit from Hurricane Ida in 2021 could have resulted in $106.2 million in damage for the parish school system. The insurance company Hughes Insurance Services provided the estimate ahead of the School Board's decision on how much standard property and "named storm" coverage it needs for the new policy year starting April 1. The decision leaves the system with just $10 million in coverage if Ascension schools receive a major hit from a major named storm. The school system's current named storm coverage is "grossly under insured" given the system's property value of $729 million. The final decision on the increase in coverage was made after several attempts by the board to keep the same coverage as the previous year and pocket $127,000 savings due to Hughes bringing in more insurers to compete for business.
Published : 4 weeks ago by David Mitchell in Weather
Had Ascension Parish taken a direct hit from Category 4 Hurricane Ida in 2021, the parish school system would have sustained $106.2 million in damage, a new risk estimate says, though the actual number could have been a good bit higher. Hughes Insurance Services provided Louisiana's ninth-largest traditional public school system with the estimate earlier this month in advance of the School Board's decision about how much standard property and "named storm" coverage it needs for the new policy year starting April 1. Near the end of last year, amid some political wrangling, the Ascension Parish School Board switched from its longtime property agent of 30 years, Bourg Insurance of Donaldsonville, to another local firm, Hughes Insurance Services of Gonzales.
Hughes promised that its new risk modeling would enable officials to better weigh premium cost versus damage risk. School officials had said that premiums in recent years were continuing to go up for less and less available coverage. That came amid a tight insurance market across south Louisiana after a string of hurricanes and severe storms had driven up losses. Top administrators had told board members that staffers were becoming uncomfortable with having to make those coverage-versus-cost decisions without more information about the risks they could be taking. Though local and parish governments can have courthouses, jails and municipal buildings, school systems often have significant property holdings spread out across a parish, with multiple school sites that can have several buildings at each location.
Fast-growing Ascension schools are a big public property holder in the parish with 32 school sites, additional administrative and special-use buildings, and the new Prairieville High School under construction for its opening this fall. Though the school system got its promised answers about potential risks, the board went for only some increase in coverage for a relatively slight increase in cost after initially deciding to keep the same coverage as the previous year and pocket $127,000 savings due to Hughes bringing in more insurers to compete for the business. Based on Hughes' modeling-based estimates, the firm had recommended beefing up the coverage significantly. The firm wanted to double the "all other perils" coverage from $50 million to $100 million and increase the named storm coverage, with its hefty 7.5% deductible, by five times, from $10 million to $50 million.
In a memo from Hughes, the company told board members the school system's named storm coverage was "grossly under insured" given the system's property value of $729 million even before the $120 million Prairieville High is included. "Hurricane Ida was a 500-year event but did not hit the area directly," Hughes wrote in its recommendation. School officials have said the damage from Ida was just under $7 million. "Had it been a direct hit, the losses would have exceeded the (current) $10M (named storm coverage) by multiples," the Hughes memo says. Hughes also warned that inflation could boost building replacement costs by 20% to 30% of current values, according to a 2022 Berkshire Hathaway analysis. A majority of the board initially balked in mid-March at either recommendation from Hughes, which combined would have boosted premiums by $1.2 million, from $2.3 million to $3.5 million, and decided to stand pat.
Then, board came back on March 26 and decided in a special meeting to accept half of Hughes' recommendation, boosting the "all other perils" coverage from $50 million to $100 million for about $29,000 in higher annual premium over the previous year. The decision still leaves the system with just $10 million in coverage if Ascension schools receive a major hit from a hurricane or other named storm. "I would love to be at the $50 million for named storms, but I think it would cost us too much," Jared "Boo" Bercegeay, the board vice chair, said in an interview. His comments mirrored the concerns of several other board members about cost but also skepticism about the benefit of boosting it due to the sizeable deductibles given the parish's actual history with hurricane damage.
Bercegeay also questioned the value of even pushing the named storm coverage to $25 million, arguing that with the high deductible, even buying half as much as Hughes recommended for named storms wasn't worth almost $900,000 per year in extra cost. "Every year that you don't have a named storm, you're putting almost a million dollars back in your pocket," he said. Also factoring into the final decision were school administrators' assurances that the level of insurance spending on named storms would be sufficient to ensure the Federal Emergency Management Agency would assist in case of a devastating direct hit. The system's insurance could handle what FEMA doesn't cover, these officials said. "Both our insurance agent and our FEMA policy expert recommended: get as much as you can afford, but the $10 million (in named storm coverage) is enough to be in compliance for the next event," said Chad Lynch, the system's chief operations director.
The increased "all other perils" coverage would pay for damage from something like a tornado, a fire or wind or hail damage that's not from a hurricane or other named storm. Hughes based its $100 million coverage recommendation for "all other perils" on a theoretical direct hit by a tornado at the three schools clustered along La. 73 in the Dutchtown area — Dutchtown High, Middle and Primary schools. Dutchtown High was Louisiana largest traditional school with more than 2,600 students last fall. Combined, the three Dutchtown schools were home to 3,755 students, or 15.6% of the Ascension system's total enrollment. The total was roughly equivalent last fall to the student enrollments of LSU-Eunice or Louisiana Delta Community College and was more than 55% greater than the size of River Parishes Community College in nearby Gonzales and nearby double that at Southern University at New Orleans, according to the Louisiana Board of Regents.
After school officials made their final decision on coverage on March 26, School Board member John DeFrances asked members to consider gradually increasing the coverage level for named storms next year. "You know that old saying, 'How do you eat an elephant? Just one bite at time.' Maybe next year we really need to consider going to at least that $15 million mark for the named storms and then even further from there," he said.
Topics: Hurricanes